The correct answer is B. Simple interest.
Simple interest is interest calculated on the principal amount only, not on any interest that has accrued. It is calculated by multiplying the principal amount by the interest rate and the number of years.
For example, if you borrow $100 at a 10% interest rate for one year, you will pay $10 in interest. The formula for calculating simple interest is:
$I = P \times r \times t$
where:
- $I$ is the interest,
- $P$ is the principal amount,
- $r$ is the interest rate, and
- $t$ is the time in years.
Present value is the current value of a future sum of money, discounted at a given interest rate. It is calculated by dividing the future sum by 1 plus the interest rate raised to the power of the number of years until the future sum is due.
Future value is the value of a sum of money at a future date, calculated by multiplying the current value by 1 plus the interest rate raised to the power of the number of years until the future sum is due.
Compound interest is interest calculated on the principal amount plus any interest that has accrued. It is calculated by multiplying the principal amount by the interest rate and the number of years, and then adding the interest to the principal amount before calculating the next interest payment.
For example, if you deposit $100 at a 10% interest rate for one year, you will earn $10 in interest. However, if the interest is compounded annually, you will earn $10.50 in interest, because the interest for the second year will be calculated on the principal amount plus the interest for the first year.